At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) makes for a good investment right now.
Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) has experienced an increase in hedge fund interest in recent months. ARNA was in 29 hedge funds’ portfolios at the end of June. There were 22 hedge funds in our database with ARNA holdings at the end of the previous quarter. Our calculations also showed that ARNA isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are perceived as worthless, outdated financial vehicles of years past. While there are over 8000 funds trading today, Our researchers hone in on the upper echelon of this group, approximately 750 funds. These money managers handle the majority of all hedge funds’ total asset base, and by observing their inimitable stock picks, Insider Monkey has formulated a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the fresh hedge fund action regarding Arena Pharmaceuticals, Inc. (NASDAQ:ARNA).
What have hedge funds been doing with Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)?
Heading into the third quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ARNA over the last 16 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Partner Fund Management was the largest shareholder of Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), with a stake worth $107.2 million reported as of the end of March. Trailing Partner Fund Management was Perceptive Advisors, which amassed a stake valued at $80.9 million. Alyeska Investment Group, Citadel Investment Group, and Atika Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds were breaking ground themselves. OrbiMed Advisors, managed by Samuel Isaly, created the most outsized position in Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). OrbiMed Advisors had $6.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $5.3 million investment in the stock during the quarter. The following funds were also among the new ARNA investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management, and Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) but similarly valued. We will take a look at Proto Labs Inc (NYSE:PRLB), Solaredge Technologies Inc (NASDAQ:SEDG), NuVasive, Inc. (NASDAQ:NUVA), and HMS Holdings Corp. (NASDAQ:HMSY). All of these stocks’ market caps match ARNA’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $346 million in ARNA’s case. NuVasive, Inc. (NASDAQ:NUVA) is the most popular stock in this table. On the other hand Proto Labs Inc (NYSE:PRLB) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ARNA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ARNA were disappointed as the stock returned -21.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.